Is EMC’s Stock a Sell After These Earnings?

A= A-Level Management Runs EMC

EMC is equipped with strong leadership at the management level. Joe Tucci has been the CEO since 2006. Preceding his role at EMC Corporation, he was the CEO of Gentronics and Wang Global from 1993 to 1999, both successful information technology service companies. In addition, he is the Chairman of the Board of Directors at VMware.

Prior to joining EMC as Chief Strategist, Paul Maritz was the CEO at VMware where he began the company’s transition from a technology leader in virtualization to one in cloud computing. Maritz is in charge of driving innovation and growth at EMC. His impressive list of credentials includes fourteen years at Microsoft and five years at Intel, proving his familiarity in the industry and an ability to maintain EMC’s position as an industry leader.

Furthermore, in 2011, Institutional Investor named David Goulden, the current President and COO, the best CFO in IT Hardware. In 2012, EMC was ranked 12th out of 500 publicly traded companies in the United States based on the previous year’s financial performance. The strong management currently at the forefront of EMC points to favorable earnings in the near future.

E = Excellent Relative Performance Versus Peers and Sector

EMC Corporation is often compared to technology companies including Hewlett-Packard Co. (NYSE:HPQ), CA Inc. (NASDAQ:CA), Citrix Systems Inc. (NASDAQ:CTXS), and Dell Inc. (NASDAQ:DELL). These comparisons can be misleading, as EMC is not producing computers like HP and Dell. Out of these companies, Dell has had some success in integrating cloud storage into their marketing strategy. HPQ continues to lag behind the competition and appears to be struggling to incorporate data storage into their products relative to the others.

The company most similar to EMC is NetApp Inc. (NASDAQ:NTAP). While these two companies should remain the dominant players, EMC has been able to steal some of NetApp’s business with the introduction of a lower-end product line. While these two companies will continue to vie for market dominance (NetApp recently announced a new product line in response to EMC stealing market share), EMC’s products are known to be superior, which means that as there is an increasing demand for cloud computing, EMC will see a large portion of the sales.

When examining the earnings multiple for EMC compared to its peers, we must take into account the fact that the number itself is deceiving due to a large portion of EMCs earning coming from their stake in VMware. EMC is currently trading at a multiple (P/E) of 14.7, and even after taking out the earnings due to VMware, one is still left with a good-sized company with FY12 revenue estimated to be roughly $21,000 million, a strong cash-flow, and zero debt—a very good value…

Using a solid investing framework such as this can help improve your stock-picking skills. Don’t waste another minute — click here and get our CHEAT SHEET stock picks now.